Last month, we submitted a letter of support for SJR 12, a Senate joint resolution introduced by Senator Dave Min that would urge the U.S. Congress and the President to change bankruptcy laws. If adopted, it would ensure that seeking bankruptcy protection does not provide a pathway for oil and gas companies to shift decommissioning responsibilities to the state and the public.
Permitting of oil and gas wells requires a commitment from the operator to plug and abandon the well, decommission associated equipment and infrastructure, and remediate the site when oil and gas production is over. These same requirements are also lease conditions when the operator seeks mineral rights from the state to produce oil from its tidelands offshore.
Unfortunately, the commitments by oil and gas well operators are not always honored. This leaves
wells that become “orphaned” and pose risks to public and environmental health and safety. Recent
studies estimate that there are about 5,500 orphan wells in the state, with tens of thousands of wells
at risk of becoming orphaned. Federal bankruptcy protections allow operators to pass their financial
responsibilities to clean up the wells to the state, with the cost to the state’s taxpayers to clean up
orphaned wells easily in the billions of dollars.
The recent bankruptcies of Platform Holly and Rincon Island directly resulted in over $200 million of General Fund appropriations to the State Lands Commission to oversee and manage the decommissioning of oil production at those two locations, and additional funds will most likely be needed to complete the decommissioning process.
As bankruptcy is a federal process, SJR 12 urges federal lawmakers to modify bankruptcy rules to make the obligation to decommission oil and gas production wells and associated infrastructure non-dischargeable and, in the event of liquidation, prioritize decommissioning of oil and gas production wells and infrastructure over all secured creditor claims.
SJR 12 will help ensure that polluters cannot dodge their responsibility to properly plug and clean up their oil and gas wells, and for these reasons, we strongly support the resolution.
The time to address this issue is now. Offshore oil and gas infrastructure is deteriorating, and productivity is plummeting. The risk to California’s coastal ecosystem and economy is not worth the constant threat these structures pose.
Visit our webpage on offshore drilling to learn more about this issue and how we’re addressing it to protect our waters.
